See the world, but learn to save and Invest for it first..!

Travelling to exotic destinations
is quite common today. It is on the agenda of not just the well to do, but even
families with limited means.

People want to see the world.
From mere tourists who want to tick places off their bucket lists, to
travellers who want to soak in the local experience in unfamiliar corners of
the world, the desire to go out there and enjoy seems to be pervasive and
growing.

So how should we goabout
organising the money to join the club?

1. We need to have that attitude
which will let us place experiences above material things. It is easy to spend
when the end result is a material possession of some sort.

To spend money and return with
memories and experiences is immensely more valuable, only in a somewhat
elevated philosophical sense. It takes effort to see such spending as important
and worthwhile. Even those who are willing to do so find themselves cutting
corners. The tourism industry is filled with deals and offers, discounts and
rebates, only to accommodate this dilemma about spending for the experience and
deciding how much is too much. The mental growth from tourist to traveller can
take a lifetime of journeys.

2.A budget
is a good place to begin as is often the case in personal finance.Many of us
dislike the idea and are put off by the detail orientation that we associate
with the word `budget'. The simple thing to do is to define what proportion of
our annual income we are willing to spend on travel. If we get a month's off
from work, or the blessed 30 days of privilege leave that the employer usually
offers, we could say that we are willing to spend a month's earning on
leisurely travel every year. This kind of relative and aggregate budgeting
enables control, while not getting too tedious in detail. For a family that
earns Rs, 10 lakh annually, a holiday that costs `5 lakh is extravagantly
indulgent!

3.A travel
fund is a good idea to pursue. Not every holiday is the same. One that involves
trekking to a mountain and staying in a camp could bring a great experience of
the outdoors and provide excellent bonding opportunities for the family, and
come at a reasonable cost. Another that involves an exotic beach and underwater
exploration might come at a steep cost. To have a corpus that is earmarked for
travel, in which money is put and drawn out as needed, will ensure that there
is adequate buffer for interspersing luxury experiences with the ordinary.

4. Contributing to the fund will
have to take place systematically and over time. There are two ways of doing
this.The traditional route is to save and invest a small portion of the income
every month with the discipline of setting aside something regularly. The other
option is to draw on our ability to do mental accounting-treating some incomes
differently from the routine income. The annual bonus is a good target to hit.
Taking the holiday soon after the bonus and spending it on the holiday is a
reasonable and relatively easy choice. Earmark some money and ensure that it is
set aside.

5. Invest the corpus sensibly so
that it can also work for you. If you set aside your bonus in year one, and
take a simpler holiday that uses half that amount, you allow the other half to
be available to grow in value and enable a better holiday later. In personal
finance, delayed gratification is not just a virtue, it also represents time
that you give your money to appreciate. Just five years of saving and investing
will create a corpus that is a comfortable amount that can be tapped into,
regularly.

6. The travel corpus that you
have now created should serve two purposes: ability to grow in value, and
ability to fund a regular withdrawal for annual holidays.The first one is a
growth objective and needs equity investing; the second is an income objective
and needs debt investing.How much your withdrawal is compared to the corpus
will determine what your asset allocation should be. If you begin with a corpus
of `5 lakh, your first bonus, and spend `4 lakh in the first year, your asset
allocation, given your withdrawal need, is 80% debt and 20% equity. It is easy
to learn asset allocation when you work with simple goals like travel. For
young earners who consistently juggle spending and saving, the travel corpus
can be a good exercise in learning the principles of personal finance.

7. Check your corpus to see if
you are postponing your holidays too much.Use it as a check point for taking
rejuvenating breaks. We all know of senior citizens with a large corpus and a
lot of free time, but weak limbs that won't take them to the places they dream
of. If you are not drawing on the corpus, the only purpose is to fund another
holiday that is coming later. If that later holiday is postponed over and over
again, the corpus surely grows, but age won't be on your side when you finally
decide to draw on it.

8. Keep your ears open to the
changing trends in the travel business to make the most of the spend. The
tourism business seems to be slipping out of hotels and resorts into the hands
of individuals who are renting their homes, serving home-cooked meals and
taking their guests on private guided tours. The Internet has emerged in a
market place where rankings and ratings enable collaborative decision-making on
a scale we have not seen before. Take a keen interest in the travel ideas you
like to pursue and give yourself the opportunity to strike value deals.

9. Avoid the cardinal sin of
holidaying on borrowed funds and overspending on credit card while travelling.
It is easy to spend first and pay later, but the compulsion of allocating
future money to a benefit that had already happened, is not a joyful experience
at all. It compromises the uses you can put your income to, and it feels
burdensome.

Tenth, stay clear of that
granddaddy of all leisure plans--building yourself a home in the hills, to
which you will retreat and enjoy your life with books and coffee on the porch.
Sinking all your money into a single asset is not a very wise idea. Avoid
locking yourself into one place, unless you have enough to own a farm and still
be able to take annual holidays. Get out there and enjoy the lonely planet!

See the world, but learn to save and Invest for it first..!
Reviewed by S. Chitra
on
June 04, 2017
Rating: 5 See the world, but learn to save and Invest for it first..! by Ms. Uma Shashikant, CIEL Travelling to exotic destinations is qui...